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MF Global Admits Liability; Will Pay $1.2Bn Restitution & $100MM Penalty

Tyler Durden's picture




 

The CFTC has won a consent order against MF Global requiring it to pay $1.212 billion in restitution to customers and a further $100 million civil penalty:

  • *MF GLOBAL TO PAY $1.2 BLN RESTITUTION, $100M PENALTY
  • *CFTC:PENALTY TO BE PAID AFTER MF FULLY PAYS CUSTOMERS/CREDITORS
  • *CFTC:LITIGATION CONTINUES VS CORZINE,O'BRIEN,MF GLOBAL HOLDINGS
  • *CFTC: MF GLOBAL ADMITS TO ALLEGATIONS OF LIABILITY IN ORDER

The big question is - of course - where is the money coming from?

Full CFTC Statement:

The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent Order against Defendant MF Global Inc. (MF Global) requiring it to pay $1.212 billion in restitution to customers of MF Global to ensure customers recover their losses sustained when MF Global failed in 2011.

 

The consent Order, entered on November 8, 2013 by U.S. District Court Judge Victor Marrero of the U.S. District Court for the Southern District of New York, also imposes a $100 million civil monetary penalty on MF Global, to be paid after MF Global has fully paid customers and certain other creditors entitled to priority under bankruptcy law. The Trustee for MF Global obtained permission from the bankruptcy court to pay restitution in full to customers to remedy any shortfall with funds of the MF Global general estate.

 

The consent Order arises out of the CFTC’s complaint, filed on June 27, 2013, charging MF Global and the other Defendants with unlawful use of customer funds (see CFTC Press Release 6626-13, June 27, 2013). In the consent Order, MF Global admits to the allegations pertaining to its liability based on the acts and omissions of its employees as set forth in the consent Order and the Complaint. The CFTC’s litigation continues against the remaining defendants: MF Global Holdings Ltd., Jon S. Corzine, and Edith O’Brien.

 

Gretchen Lowe, Acting Director of the CFTC’s Division of Enforcement, stated, “Division staff have worked tirelessly to ensure that 100 percent restitution be awarded to satisfy customer losses. The CFTC will continue to ensure that those who violate U.S. commodity laws and regulations designed to protect customer funds will be vigorously prosecuted.”

The CFTC’s Complaint charged MF Global, a registered Futures Commission Merchant (FCM), with violating provisions of the Commodity Exchange Act and CFTC Regulations intended to protect FCM customer funds and requiring diligent supervision by registrants. Specifically, the Complaint charged that during the last week of October 2011, MF Global unlawfully used customer segregated funds to support its own proprietary operations and the operations of its affiliates. In addition to the misuse of customer funds, the Complaint alleged that MF Global

 

(i) unlawfully failed to notify the CFTC immediately when it knew or should have known of the deficiencies in its customer accounts,

 

(ii) made false statements in reports it filed with the CFTC that failed to show the deficits in the customer accounts,

 

(iii) used customer funds for impermissible investments in securities that were not considered readily marketable or highly liquid in violation of CFTC regulation, and

 

(iv) failed to diligently supervise the handling of commodity interest accounts carried by MF Global and the activities of its partners, officers, employees, and agents.

 

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Mon, 11/18/2013 - 13:08 | 4165571 NotApplicable
NotApplicable's picture

Good thing they've only had how many years to finish bleeding this pig dry?

Mon, 11/18/2013 - 13:10 | 4165578 rehypothecator
rehypothecator's picture

Free Jon Corzine!!

Mon, 11/18/2013 - 13:13 | 4165594 dick cheneys ghost
dick cheneys ghost's picture

free francis, free Otto, free trav777..........

Mon, 11/18/2013 - 13:30 | 4165658 AlaricBalth
AlaricBalth's picture

The money for the settlement is coming from non-customer unsecured creditors.

Attached is the list of unsecured creditors, with JPM at the top with an $1,200,000 revolving credit facility. 

http://www.scribd.com/doc/78536180/ucclist-010412

Mon, 11/18/2013 - 13:37 | 4165688 Big Corked Boots
Big Corked Boots's picture

Is the penalty paid before or after the lawyers get their fee?

Mon, 11/18/2013 - 14:22 | 4165890 aVileRat
aVileRat's picture

It's so funny that 2 years ago everyone swore there was no fraud. So, if they managed to punish Steve "fucking" Cohen by "arresting" his holding company and personally going after his fortune.... what is preventing them from going after "Honorable" John "Shithead" Corzine ?

No seriously, its the 7 billion dollar question being asked right now at Skadden Arps. How is it that one fund can be punished after a 7-year sting operation yet a bigger fraud that literally took down a gold seat is being glazed over. If there ever was a case being displayed to the sheeple of selective market enforcement, this is it. Period. Full stop. Fit to print on page 1 of NYT, oh wait, NYT was the 5th largest party bundler for Obama 2008....

 

Mon, 11/18/2013 - 18:12 | 4166994 starfcker
starfcker's picture

anybody smell a rat here? corzine made a 6 billion dollar bet on some really bad european paper that maybe noone else wanted, at a time they really needed a buyer. is he stupid, or just a loyal member of the gold team he once captained. did that money help buy time to set up all the european bailout facilities? we had a similar situation in florida taking money from the state insurance pool in an attempt to stabilize lehman a month or two before it collapsed. same deal, horrible looking (and illegal) transaction, no prosecutions. 

Mon, 11/18/2013 - 13:44 | 4165719 NotApplicable
NotApplicable's picture

WAT???

Isn't that $1.2B (not million) owed to JPM?

Mon, 11/18/2013 - 13:55 | 4165749 AlaricBalth
AlaricBalth's picture

Correct!! I forgot a three zero's. My bad. The number should be $1,200,875,000

Mon, 11/18/2013 - 14:15 | 4165868 toys for tits
toys for tits's picture

So MF gets enough from JPM to pay the fine, then JPM gets a new batch of cash from the FED.  

 

It's the circle of life for the 21st century.

 

And Corzine gets spared for doing worse shit than the Enronians.

Wed, 11/20/2013 - 20:15 | 4175674 MeelionDollerBogus
MeelionDollerBogus's picture

circle-jerk of life (of crime)
... fixed it for ya.

Mon, 11/18/2013 - 13:32 | 4165665 Troll Magnet
Troll Magnet's picture

freegold!
oh, shit...don't drone me, bro! i didn't mean it!

Mon, 11/18/2013 - 14:03 | 4165801 tsuki
tsuki's picture

free-bie!

Mon, 11/18/2013 - 14:08 | 4165825 Cult of PersonALity
Cult of PersonALity's picture

I will free the bundler via a last minute pardon if necessary.  So fear not... the change ...ahhh  of hope will allow the uhh...   justice to be perverted.... i mean ummm   justice to prevail... and you can keep your policy ...  if you uh ...  built it...

Mon, 11/18/2013 - 17:43 | 4166870 StychoKiller
StychoKiller's picture

Praise be to the Obamatron, we can always count on him! :>D

Mon, 11/18/2013 - 17:16 | 4166742 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

* With the purchase of a bankster of equal or greater value.

Mon, 11/18/2013 - 13:09 | 4165575 Ignatius
Ignatius's picture

"The big question is - of course - where is the money coming from?"

Customer accounts.

Mon, 11/18/2013 - 13:14 | 4165595 venturen
venturen's picture

That is easy....it is the AskJPM acccount at the FED. Jamie just order up whatever is needed to paste over some fraud! The printed trillions from the FED will heal everything. /SARC

Mon, 11/18/2013 - 14:02 | 4165794 tsuki
tsuki's picture

There are no customer accounts.  There are no customers.  There are unsecured loans to MF Global from individuals. 

Mon, 11/18/2013 - 14:36 | 4165967 12ToothAssassin
12ToothAssassin's picture

Yes! This is the new Cyprus template. Customer deposits arent that, they are unsecured loans to the banks. Shut up slave!

Mon, 11/18/2013 - 13:12 | 4165576 Dr. Engali
Dr. Engali's picture

Requiring to pay and actually paying are two different things. Do they get a lump sum or an annuitized payment over thirty years?

Mon, 11/18/2013 - 13:14 | 4165579 ACP
ACP's picture

The money will come from bitcoin...double whammy.

Corzine gets the debt paid by bitcoin holders from the banged up currency and the Senate gets their false flag. A big hullaballoo in the Senate 'crashes' bitcoin as the manipulators cash out.

Well played, NWO.

 

Mon, 11/18/2013 - 13:11 | 4165582 orangedrinkandchips
orangedrinkandchips's picture

I was saying that all along while reading the first part....

 

WHERE THE FUCK IS THE MONEY COMING FROM?? (OBAMA)

Mon, 11/18/2013 - 13:11 | 4165585 Lotus
Lotus's picture

The money is coming from Jonny's garage sale.

Mon, 11/18/2013 - 13:13 | 4165588 Atomizer
Atomizer's picture

The money is coming from the same slush fund where it was initally hidden.

Mon, 11/18/2013 - 13:12 | 4165590 ParkAveFlasher
ParkAveFlasher's picture

Where? Janet Yellen FTW

Mon, 11/18/2013 - 13:55 | 4165755 cougar_w
cougar_w's picture

Correct.

Mon, 11/18/2013 - 13:15 | 4165598 maskone909
maskone909's picture

lets fine TBTF so the tax payers foot the bill.  great work guys. that'l teach em

Mon, 11/18/2013 - 13:15 | 4165605 IndyPat
IndyPat's picture

Shoulda' called Saul!

Mon, 11/18/2013 - 13:17 | 4165614 EscapeKey
EscapeKey's picture

Unvaporization!

It's by the same process they fund the government deficit!

Mon, 11/18/2013 - 13:18 | 4165619 Atomizer
Atomizer's picture

Where is Waldo – Federal Reserve Edition

http://www.newyorkfed.org/markets/pridealers_listing.html

Mon, 11/18/2013 - 13:20 | 4165623 ziggy59
ziggy59's picture

Corzine probably converted $ to BTC

Mon, 11/18/2013 - 13:20 | 4165625 NoTTD
NoTTD's picture

Again, penalty is 8% of the fraud.  That's a transaction fee for breaking the law, ruining lives, etc. -  and Corzine is where?  the Hamptons?

 

Go ahead and commit a multi-billion dollar fraud. What do you think your fine would be?  That's a trick quesiton.  You'd go to jail.  Beside Madoff.

Mon, 11/18/2013 - 13:20 | 4165626 centerline
centerline's picture

Yeah, the money will provided by the FED on the backs of the tax payers.  Nothing new here.  Everyone knows QE is if for the banks - and those who are closest to it get the greatest benefit.  It is a "who you know" society now... and we all know where that leads.

What is notable here is that litigation against Wall Street is increasing.  The game is changing.

 

Mon, 11/18/2013 - 13:38 | 4165697 DirkDiggler11
DirkDiggler11's picture

I disagree. This is a measly a stage play for the Muppets as .gov can tell the natives are growing restless.

It will be "game changing" when lying, cheating, and of course stealing pieces of shit like Corzine start hanging from trees as decorations for the town square while vultures feed from their entrails....

Mon, 11/18/2013 - 14:27 | 4165919 centerline
centerline's picture

By the time bankers are hanging from trees, there will be riots and chaos.  I care about the more subtile steps towards that outcome.

In my humble opinion there is no way the FED, Wall Street and Washington all comes out of this alive.  Aside from the government from being overthrown, that leaves the FED and Wall Street in terms of someone getting dismantled.  I wager the big banks are the ones to get pulled apart first... only after the next crisis which will likely involve massive bail ins.

Think about it... after all that has happened, there is no damn way Wall Street is getting another bail out.  The operative word here is "out."  It will be a bail "in."  And the terms will be dismantling of the TBTF banks... which will be cheered by the masses... right before they realize where it all is leading to anyhow.

Mon, 11/18/2013 - 15:53 | 4166309 cougar_w
cougar_w's picture

In the money-soaked pantheon of evil and self-serving sociopaths, nobody can top the wastrels in government. These vermin can pass any law they want to at any time including and especially in the middle of the night, in order to scapegoat any portion of society they need to, the better to extract any concession or sacrifice they have to in order to survive another election cycle. Nobody can escape their clawed political grasp on absolute power. The TBTF banks and financial mavens will be ripped to shreds and left for dead the instant politicians start to sense any heat growing against the excesses of power and influence they themselves promote and profit from. The money held by the rich and powerful will not save them; the political class will take their money in the name of fairness (I can imagine a dozen populist lines that would work for this purpose) and then throw the financial class bodily into prisons if they resist, or find a way to inflame the masses into murdering them.

I have no pity for the ruling financial pirates. They have sown their seed upon the wind, and they shall reap the whirlwind. But I am very afraid of the political class in America and what all they will do when the time comes to protect their personal fortunes and grip on power. Death, ruin and tyranny slumber in the statehouses of this country. These demons can and will be wakened to preserve the political class in the form of police state excesses, spying, disappearances, witch-hunts, ethnic cleansings, street-level brutality and soul-destroying propaganda. The more they allow the country to collapse into disorder the easier it is to "do the needful" as they will put it, when they are ready.

And not two stones of the firewalls of this republic will be left standing when they are finished.

Wed, 11/20/2013 - 20:11 | 4175655 MeelionDollerBogus
MeelionDollerBogus's picture

Makes no sense.
The financial class OWN the political class. Not with money. With power: power to remove family members, to disclose crimes & secrets, to have vital assets disappeared, re-located or re-owned without warning, etc.

Wed, 11/20/2013 - 20:08 | 4175635 MeelionDollerBogus
MeelionDollerBogus's picture

after the ant-hill, yes.
I know, I gave it some thought but the other suggestion about making sure it finishes with Corzine on the ant-hill is a sure-fire winner.
By all means when they ants are mostly done & the glurbly screaming stops we can finish the presentation with the tree, once the process itself is over.

Mon, 11/18/2013 - 13:26 | 4165644 buzzsaw99
buzzsaw99's picture

The CFTC will continue to ensure that those who violate U.S. commodity laws and regulations designed to protect customer funds will be vigorously prosecuted.

 

BULLSHIT!!!!!!

Mon, 11/18/2013 - 14:01 | 4165787 NoTTD
NoTTD's picture

Sentence should continue,   "...to the fullest extent of whatever we can get them to agree to."

Mon, 11/18/2013 - 13:27 | 4165650 koaj
koaj's picture

Wake me when Corzine is in jail....

Mon, 11/18/2013 - 13:29 | 4165657 Bay of Pigs
Bay of Pigs's picture

Maybe the money comes from JPM and their PM short positions. They've made billions on it over the last decade.

Throw gool ol' Jonny C a bone for playing ball with them went it all went south, and the Morgue ran off with all their physical gold.

The CFTC a toothless shitbag regulator. Everyone will walk on this. Count on it.

Mon, 11/18/2013 - 13:35 | 4165679 Stonedog
Stonedog's picture

I can tell you it ain't coming from Corzine...

Mon, 11/18/2013 - 13:39 | 4165700 Grinder74
Grinder74's picture

"The big question is - of course - where is the money coming from?"

How about Obama For America?

Mon, 11/18/2013 - 13:51 | 4165740 AgileArjuna
AgileArjuna's picture

such a relief to know my unallocated accounts and ETFs are safe.

Mon, 11/18/2013 - 13:58 | 4165771 cougar_w
cougar_w's picture

"The CFTC will continue to ensure"

Oh I see now, getting a little nervous are they. CYA is due to become a national sport around here.

Mon, 11/18/2013 - 14:01 | 4165789 Hulk
Hulk's picture

The damage has been done. MFGlobal bankrupted many people. Damages need to be awarded too...

Mon, 11/18/2013 - 14:10 | 4165831 mofreedom
mofreedom's picture

and from their auditors PWC.

Mon, 11/18/2013 - 14:13 | 4165848 SillySalesmanQu...
SillySalesmanQuestion's picture

Did they find and break open Corzine's piggy bank...?

Mon, 11/18/2013 - 14:13 | 4165855 Duude
Duude's picture

Fat chance collecting that now. Government has refused to prosecute so no need to make good on this. They will likely file bankruptcy and a couple of years down the road, Jonny will begin a new hedge fund under another name.

Mon, 11/18/2013 - 14:14 | 4165860 laurelweiner@ya...
laurelweiner@yahoo.com's picture

sorros sold those italian bonds at a premium right?

Mon, 11/18/2013 - 14:14 | 4165864 laurelweiner@ya...
laurelweiner@yahoo.com's picture

sorros sold those italian 

bonds at a premium right?

Mon, 11/18/2013 - 14:28 | 4165928 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

If an open season were to be declared on a certain guy with a big role in MF global, should it be regulated as :

UP ARROW -- Caliber only greater than .240

DOWN ARROW -- Any dull or sharp instrument travelling at any velocity

Mon, 11/18/2013 - 14:56 | 4166069 Kobe Beef
Kobe Beef's picture

As long as it ends with him staked alive to an anthill, I'm good with that.

Mon, 11/18/2013 - 15:05 | 4166121 ToNYC
ToNYC's picture

from Jon Corzine's cookie jar.

Mon, 11/18/2013 - 15:13 | 4166165 ZeroPoint
ZeroPoint's picture

Let me guess, the restitution will come in the form of a tax payer funded bailout.

Mon, 11/18/2013 - 15:26 | 4166214 bondman1
bondman1's picture

This admission certainly is ..ahem...fortunately timed!!!LOL

On 11/18/13: Obama to Nominate Massad as CFTC Chairman Gensler Successor.....“Gensler has been purposefully aggressive both in the implementation of the Dodd-Frank Act as well as his wish to expand the CFTC’s scope, and I simply don’t believe Massad will be anywhere near as laser-focused as Gensler has been,” Isaac Boltansky, policy analyst at Compass Point Research & Trading LLC.

 

Wed, 11/20/2013 - 19:53 | 4175573 MeelionDollerBogus
MeelionDollerBogus's picture

Gensler... laser... focused

You know, a solid investment is a coffee-proof keyboard just for zerohedge.

Mon, 11/18/2013 - 16:26 | 4166473 CEOoftheSOFA
CEOoftheSOFA's picture

So when does Corslime spend some time at Rikers?

Mon, 11/18/2013 - 16:30 | 4166498 SmittyinLA
SmittyinLA's picture

what about the losses from closed futures positions? 

Mon, 11/18/2013 - 16:32 | 4166507 tradewithdave
tradewithdave's picture

My guess is it is driven by a judicial timeline that insures case cannot be completed before pardon day. Better "hope" Pardoner in Chief is still the enabler for the bundlr.

Wed, 11/20/2013 - 19:46 | 4175545 MeelionDollerBogus
MeelionDollerBogus's picture

is or is not from the Onion? Can't tell anymore!

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